ABOUT THIS PROJECT
Sometimes, estate planning involves protecting our beneficiaries either from themselves, future creditors or protecting them so that they do not lose any government benefits that they would be receiving at the time they would inherit. An effective way to offer this protection is through a special needs trust.
TWO TYPES OF SPECIAL NEEDS TRUSTS
“Self-settled” or a “Third Party SNT"
The first is a “Self-settled” or a “First Party Special Needs Trust.” This type of trust is funded with the beneficiary’s (the person who has the special need) own money. A good example of this is where a beneficiary has been involved in a lawsuit and is now coming into a large court settlement amount which, it is the money of the Special Needs Beneficiary. That money is used to create the trust. These types of trusts are created by a parent, guardian, grandparent or the court. Recently, the law was changed to allow the disabled person to create a First Party SNT for himself or herself, if competent to do so.
A third party SNT is created using the funds of others to create a trust on one’s behalf. An example of this is when a parent creates a special needs trust within her or his will or trust. This type of trust will hold the money that the special needs person would have received as part of an inheritance from a parent. It is created upon the death of the parent as part of the parent’s estate plan. Anyone can contribute to a third party SNT, thus allowing people other than parents to name the trust in their will or as a beneficiary.
There are pros and cons to each type of trust, and it is crucial that all aspects are discussed with an attorney when deciding to create one of these types of trusts.
May want to add ABLE Act and the fairness act that allows a person to create their own 1st party trust.
